Ethereum Blobs Could Significantly Boost ETH Price Long-Term, Research Shows
Tim Robinson, Head of Crypto Research at BlueYard Capital, presented simulations suggesting that Ethereum's "blobs" could significantly enhance the long-term price of ETH. In posts on X, he indicated that blobs may transform Ethereum’s scalability and economic dynamics.
Robinson stated, “Many people arguing about blobs, but so far no one has simulated how they respond to demand… until now. TL;DR: Blobs are insanely bullish for ETH long term.”
Why Blobs Are Bullish for Ethereum Price
Blobs, introduced in Ethereum Improvement Proposal (EIP)-4844, are large data structures intended to improve the network’s capacity by efficiently managing off-chain data. This mechanism is crucial for Layer 2 (L2) scaling solutions, enabling lower transaction fees while ensuring security through Ethereum’s consensus.
Robinson's simulation forecasts Ethereum achieving 10,000 transactions per second (TPS), burning 6.5% of its total ETH supply annually, with L2 transactions averaging $0.06. This scenario includes 16 MB of blobs per block, aligning with Ethereum co-founder Vitalik Buterin’s medium-term goals outlined in his latest “The Surge” post.
He elaborated, “Yes, that’s Ethereum operating at 10k TPS, burning 6.5% a year while L2 transactions cost an average of $0.06, with 16 MB of blobs per block.”
A significant insight from Robinson’s research is the rapid increase in ETH burning as blob usage rises. He noted, “It’s interesting how quickly blobs go from being free to burning a ton of ETH. It seems almost everyone doesn’t understand this tipping point.”
Robinson provided a simulation tool demonstrating the ETH burn rate’s exponential growth as TPS increases from approximately 180 TPS to 400 TPS, showing burned ETH rising from about 4 ETH per day to 1,832 ETH per day.
It’s interesting how quickly blobs go from being free to burning a ton of ETH. It seems almost everyone doesn’t understand this tipping point. Here’s what it looks like increasing from today’s ~180TPS to 400TPS pic.twitter.com/fjuK19NL6y
— Tim Robinson (@timjrobinson) October 29, 2024
The scalability potential is further enhanced by Peer Data Availability Sampling (PeerDAS), which allows blob capacity to scale with the number of validators. Robinson explained, “Because total blob capacity scales with total validators, after PeerDAS is implemented, blobs can scale as high as needed.”
Robinson identified a feedback loop where ETH price inversely affects the burn rate. “Another interesting feedback loop is the lower the ETH price, the higher the burn! As transaction prices are lower, more transactions are made, and the burn soars,” he noted.
Another interesting feedback loop is the lower the ETH price, the higher the burn! As transaction prices are lower, more transactions are made, and the burn soars. See how different the burn is with ETH at $2k vs ETH at $10k: pic.twitter.com/tbSbC6unwM
— Tim Robinson (@timjrobinson) October 29, 2024
Regarding value accrual for ETH, Robinson stated, “So how will ETH accrue value? Being the most useful, scarce, deflationary asset with 10,000+ teams using Ethereum to grow their products will probably do it.”
This research has generated interest within the ETH community. Mat (@materkel) commented on X regarding the need for Layer 2 solutions to adapt to blob capacity, emphasizing the importance of efficient pricing mechanisms.
Robinson responded, highlighting the necessity for proactive analysis to mitigate potential issues as the market stabilizes with increased blob usage.
At press time, ETH traded at $2,638.
